Record Swiss loss of SFr20bn for UBS

UBS on Tuesday announced the highest loss in Swiss corporate history as Europe’s biggest casualty of the credit crisis said it lost nearly SFr20bn ($17bn, €13.2bn) in 2008.

The loss, which was above market expectations, was swollen by a SFr8.10bn loss in the fourth quarter, and came in spite of a surprise SFr1.73bn tax benefit and a reclassification of assets that allowed the bank to avoid recognising a further trading loss of about SFr3bn.

UBS, which has come under severe political pressure in Switzerland after a government bail out last October, said it was slashing bonus payments. Variable compensation in the investment bank, the heart of its problems, will be 95 per cent lower than the previous year, and 80 per cent lower for the group overall. Total bonuses paid will fall to SFr2.2bn.

Separately, the bank announced a limited reorganisation to allow greater focus on its core Swiss and wealth management businesses, with the appointment of a new chief executive for the home market and a strengthening of wealth management’s representation on the group’s executive board.

UBS said it would reduce headcount at its securities business to 15,000 by the end of the year, below a previous target of 17,000. The bank eliminated 1,782 jobs in the fourth quarter, with most of the losses falling in the investment banking business.

However, in spite of the problems at the investment bank, UBS emphasised its commitment to investment banking, again scotching rumours that the unit may be sold.

“The investment bank remains a core business of UBS,” the group said in a statement. Virtually the same comment was used for institutional asset management, once also seen by outsiders as a sale candidate. The shares rose as much as 7.1 per cent before settlling back to stand 4.9 per cent higher at SFr13.53 in afternoon Zurich trading.

Marcel Rohner, chief executive, also played down speculation that the group might sell its US wealth management activities, based on the former PaineWebber brokerage businesses. He said in a conference call that the wealth management Americas business was “an integral part of our business.”

Clients continued to withdraw large quantities of money from the group in the fourth quarter. Net new money outflows in wealth management and business banking reached SFr58.2bn in the fourth quarter – bigger than the already high amount for the previous quarter. Institutional asset management saw net withdrawals of SFr27.6bn in assets.

More positively, the group’s outlook for 2009 was slightly more upbeat than in the past, while Mr Rohner repeated the forecast of Peter Kurer, UBS’s chairman, that the bank would be profitable this year.

“UBS has had an encouraging start to the year… However, financial market conditions remain fragile”, it said.

Mr Rohner said net new money in both wealth management and asset management had been positive in January, but gave no figures.

The group said its risk positions further declined in the fourth quarter, and said it was transferring fewer toxic assets than expected to the special fund set up with the Swiss National Bank. The total will now amount to $39bn from up to $60bn before.

The tier 1 capital ratio, a measure of financial strength, amounted to 11.5 per cent at the end of last year. Risk weighted assets fell by 9 per cent to SFr302bn.